Q3 Financial Highlights

• Sales of $150.3 million, compared to $157.3 million last year
• Defence sales grew 21% year-over-year, mitigating the impact of the pandemic on the civil sector
• Operating income remained stable at $13.4 million
• Adjusted EBITDA¹ of $23.7 million, or 15.8% of sales, compared to $24.6 million, or 15.6% last year
• Cash flows related to operating activities of $26.7 million, compared to $9.7 million last year
• Net debt decreased by $29.1 million, or $57.2 million on a year-to-date basis

Q3 Operational Highlights

• Héroux-Devtek selected as part of Boeing's Premier Bidder Program
• Early renewal of a three-year collective agreement with the unionized employees of its Laval facility

LONGUEUIL, QC, Feb. 5, 2021 /CNW Telbec/ - Héroux-Devtek Inc. (TSX: HRX) ("Héroux-Devtek" or the "Corporation"), a leading international manufacturer of aerospace products and the world's third-largest landing gear manufacturer, today reported strong financial results for the third quarter ended December 31, 2020. Unless otherwise indicated, all amounts are in Canadian dollars.

"I am particularly pleased with our third quarter results. The disciplined approach we adopted early in the onset of the COVID-19 pandemic, including our restructuring plans and a pivot to defence orders, are reflected in our improved profitability and sales performance. Our diligent controls over inventory and working capital have also driven strong cash flow, leading to an even stronger balance sheet. This would not have been possible without the extraordinary resilience and commitment of our employees, each of whom I wish to thank wholeheartedly," said Martin Brassard, President and CEO of Héroux-Devtek.

"As we turn to the final quarter of the fiscal year, we remain confident in our ability to deliver strong financial and operational performances in spite of the sluggish civil air travel environment. As we continue to rightsize our operational capacity to meet future demand and production rates, we will pursue further development and growth opportunities across all our markets," added Mr. Brassard.

THIRD QUARTER RESULTS

Consolidated sales decreased 4.4% to $150.3 million, from $157.3 million last year. Defence sales were up 21.1%, from $84.1 million last year to $101.8 million. The increase was largely fuelled by the ramp-up of deliveries under the Boeing F-18, Sikorsky CH-53K and Saab Gripen-E programs. Civil sales decreased 33.7%, from $73.2 million to $48.5 million. This decrease is mainly related to lower deliveries for large commercial programs, where twin-aisle deliveries decreased 44%, reflecting lower OEM demand.

Gross profit for the quarter grew from $26.8 million, or 17.1% of sales last year, to $28.1 million or 18.7% of sales, driven by a better sales mix, the positive effect of restructuring activities on the Corporation's fixed cost structure and lower depreciation costs.

Operating income increased from 8.6% to 8.9% of sales, or from 8.6% to 9.4% excluding $0.8 million of restructuring charges, reflecting strong profitability. Foreign exchange had a negative impact of $0.5 million, or 0.2% of sales. Adjusted EBITDA, which excludes non-recurring items, stood at $23.7 million, or 15.8% of sales, compared with $24.6 million, or 15.6% of sales, a year ago.

Earnings per share remained stable at $0.24, while adjusted EPS grew 8.3% at $0.26 compared to $0.24 last year due to the factors stated above.

NINE-MONTH RESULTS

Consolidated sales decreased 6.8% to $415.7 million, from $446.2 million for the corresponding period last year. Defence sales were up 15.2%, from $234.4 million last year to $270.2 million in the first nine months of the year, while civil sales decreased 31.3%, from $211.8 million to $145.5 million.

Gross profit decreased from $73.3 million, or 16.4% of sales last year to $69.7 million or 16.8% of sales. While the gross profit in dollars remained below last year due to the impact of COVID-19 on civil sales, a better sales mix than last year and the effects of restructuring initiatives drove an improvement in margins as a percentage of sales.

Operating income decreased from 7.7% to 5.3% of sales reflecting non-recurring charges totaling $9.5 million compared to $0.6 million last year. Excluding these items, adjusted operating income decreased from 7.8% to 7.5% of sales, reflecting a negative foreign exchange impact representing 0.3% of sales.

Adjusted EBITDA, which excludes non-recurring items, stood at $63.3 million, or 15.2% of sales, compared with $67.6 million, or 15.1% of sales last year.

EPS decreased from $0.60 last year to $0.31, mainly reflecting this year's restructuring charges, while adjusted EPS decreased to $0.52 from the $0.61 recorded in the same period last year.

FINANCIAL POSITION

As at December 31, 2020, net debt stood at $189.7 million, down from $246.9 million as at March 31, 2020. In the third quarter, net debt decreased $29.1 million, and decreased $57.2 million over the nine-month period – as a result of cash flow generation over the three- and nine-month periods.

As at December 31, 2020, the Corporation had a strong financial position with $249.8 million of available liquidity, compared to $192.8 million as at March 31, 2020.

RESTRUCTURING UPDATE

Since the beginning of the fiscal year, Héroux-Devtek has announced restructuring initiatives in light of the ongoing COVID-19 pandemic. These initiatives will affect 15% of the workforce, or approximately 315 employees, and includes the closure of Alta Precision and APPH Wichita.

To date, $9.5 million of related costs have been recorded as restructuring charges, mainly comprised of employee-related charges and costs to dismantle and relocate machinery. As planned, 76% of staff reductions have been completed as at the end of the quarter and the remaining reductions will occur after the closure of Alta Precision and APPH Wichita.

CONFERENCE CALL

Héroux-Devtek Inc. will hold a conference call to discuss these results on Friday, February 5, 2021 at 8:30 AM Eastern Time. Interested parties can join the call by dialing 1-888-231-8191 (North America) or 1-647-427-7450 (overseas). The conference call can also be accessed via live webcast on Héroux-Devtek's website, www.herouxdevtek.com/en/news-events/events or at http://bit.ly/HRX_Q3-2021. An accompanying presentation is also available on Héroux-Devtek's website at https://www.herouxdevtek.com/en/investors/financial-documents.

If you are unable to call in at this time, you may access a recording of the meeting by calling 1-855-859-2056 and entering the passcode 3293138 on your phone. This recording will be available from Friday, February 5, 2021 as of 11:30 AM Eastern Time until 11:59 PM Eastern Time on Friday, February 12, 2021.

FORWARD-LOOKING STATEMENTS

Except for historical information provided herein, this press release contains information and statements of a forward-looking nature concerning the future performance of the Corporation.

Forward-looking statements are based on assumptions and uncertainties as well as on management's best possible evaluation of future events. Such factors include, but are not limited to: the effect of the ongoing COVID-19 pandemic on Héroux-Devtek's operations, customers, supply chain, the aerospace industry and the economy in general; the impact of other worldwide general economic conditions; industry conditions including changes in laws and regulations; increased competition; the lack of availability of qualified personnel or management; availability of commodities and fluctuations in commodity prices; financial and operational performance of suppliers and customers; foreign exchange or interest rate fluctuations; and the impact of accounting policies issued by international standard setters. Readers are cautioned that the foregoing list of factors that may affect future growth, results and performance is not exhaustive and undue reliance should not be placed on forward-looking statements.

As a result, readers are advised that actual results may differ from expected results. Please see the Risk Management section in the Additional Information tab in the Corporation's MD&A for the third quarter ended December 31, 2020 for further details regarding the material assumptions underlying the forecasts and guidance. Such forecasts and guidance are provided for the purpose of assisting the reader in understanding the Corporation's financial performance and prospects and to present management's assessment of future plans and operations, and the reader is cautioned that such statements may not be appropriate for other purposes.

NON-IFRS MEASURES

Adjusted operating income, adjusted EBITDA, adjusted net income, adjusted earnings per share and free cash flow are financial measures not prescribed by International Financial Reporting Standards ("IFRS") and are not likely to be comparable to similar measures presented by other issuers. Management considers these to be useful information to assist investors in evaluating the Corporation's profitability, liquidity and ability to generate funds to finance its operations. Refer to Non-IFRS financial measures under Operating Results in the Corporation's MD&A for definitions of these measures and reconciliations to the most comparable IFRS measures.

ABOUT HÉROUX-DEVTEK

Héroux-Devtek Inc. (TSX: HRX) is an international company specializing in the design, development, manufacture, repair and overhaul of aircraft landing gear, hydraulic and electromechanical actuators, custom ball screws and fracture-critical components for the Aerospace market. The Corporation is the third-largest landing gear company worldwide, supplying both the defence and commercial sectors. Approximately 90% of the Corporation's sales are outside of Canada, including about 53% in the United States. The Corporation's head office is located in Longueuil, Québec with facilities in Canada, the United States, the United Kingdom and Spain.

SOURCE Héroux-Devtek Inc.

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